Posts tagged "Leasing"

It can be difficult to see the signs that you need new office space for your business. Maybe it’s the fear of change or the discomfort of moving all of your files, equipment and employees to a new office. Whatever the hesitation, the consequences of not moving to a better functioning space can be far worse than the temporary inconvenience of relocating.

Take a look at these five signs that you might need new office space and think about how they relate to your own work environment.

While it may seem fun and hip to have your employees work in one big open space together, keep in mind that people need privacy, just as much as they need community, to get work done. If your office space lacks a private area for holding meetings or making phone calls – or even just a space where employees can go to work in silence for a few hours, it’s time to look for an office that provides a little more privacy.

It doesn’t reflect your brand or company culture

Are you an innovative tech startup, but you’re working in an office space that looks like it belongs to a law firm from the 1950’s? When your work environment contrasts with your brand and company culture, it can have a negative impact on your employees. It’s important to work in a space that complements the brand you’re working to create. This is a subconscious reminder to employees of the business’s core values you want them to represent in everything they do.

There’s no room for growth

If you’re a business that has plans to grow your operations and add to your number of employees, yet you don’t have room for one more desk, let alone a filing cabinet, it’s time to start looking for new office space! Don’t wait until you are desperate to move, or you may make a desperate decision that isn’t in your best interest. Start looking for more space preemptively and work with a qualified commercial real estate broker who can help you negotiate the best deal possible.

You’re paying too much

Finally, if you’re dumping too much of your profits into your office lease, it’s time to look for a more financially responsible work space. Sure, a pricy loft with views of the Harrisburg Capitol is great for your ego, but it’s terrible for the sustainability of your business. This is a red flag that it’s time to work with a tenant representative who can show you a wide variety of attractive options while staying within your budget.

Can you relate to one or more of these signs? Ask us your office space related questions and we will personally respond with our expert advice!

You are likely aware that there are different classifications of office space, specifically Class A, B and C. But what qualities determine the letter associated with any given commercial property? Is it the location, the layout, the finishes or the amenities?

The answer is it has to do with all of these things! The classification of office space is very important to keep in mind both as a real estate investor and as a business tenant. Your budget and use of the space will help determine the class best suited for your needs. When looking to rent or buy commercial real estate, you can save a lot of time and frustration by teaming up with an experienced tenant representative or buyer agent who can advise you on the most appropriate class.

Here’s an overview of the pros and cons of each of the three classifications of office real estate!

Class A

Overview: As you might expect by the name, Class A office space is considered extremely desirable investment-grade properties and command the highest rents or sale prices compared to other buildings in the same market. These buildings are in prime locations with efficient tenant layouts that function as well as they look. Some Class A office space is an architectural or historical landmark designed by prominent architects. Simply put, Class A office space is for the renter or investor who wants the highest level of quality and convenience and is willing to pay a premium for it.

Pros: With Class A office space, you know you’re getting the best – the best location, layout, finishes and amenities. You are likely to have other desirable businesses as your “neighbors” in the same building which can increase the value of your space. You can also rest assured knowing the space will be well maintained for the premium price, meaning less headaches or inconveniences for you in the long run.

Cons: This class of space comes with the highest rent or sale prices. You may also have less negotiation power since the space you’re getting is usually in top condition with every advantage to drive the price high – including many businesses who are eager to jump on the space if you don’t.

How It Relates to the Local Market: The Central Pennsylvania submarket has 93 existing buildings that are classified as Class A. Combined, that’s a total RBA of 8,820,990 square-feet. After submarkets Philadelphia CBD/Non-CBD and Southern New Jersey, Central PA is the submarket with the lowest vacancy rate in CoStar’s Philadelphia Office Market Area, coming in at 9.9% in first quarter 2016. The average asking rental rate for this the first quarter is $19.78 which is the third lowest rate in the market area.

Additionally, it’s worth noting that just because two buildings are both considered Class A, does not mean they are equal. This is all the more reason to work with an experienced tenant representative who can help you find the best space at the best price to meet your needs. Just take a look at the example of these two buildings in the Central PA submarket below. Both are Class A, but for which property would you be willing to pay the premium price?

Overview: Class B office space is a step down from Class A space in its location, design, quality and amenities. As such, this space carries a lower price tag. Class B buildings offer utilitarian space without special attractions and have “ordinary” design, compared to Class A. These buildings typically have average to good maintenance, management and tenants. They are less appealing to tenants than Class A properties, and may be deficient in a number of respects including floor plans, condition and facilities. They lack prestige and must depend chiefly on a lower price to attract tenants and investors.

Pros: Since Class B office space is “middle of the road” for the classes, you have the advantage of getting a better work environment than Class C for a price that’s less expensive than Class A. As an owner or investors of Class B space, you’re likely to find many tenants whose budget and expectations align best with Class B space.

Cons: On the flip side, Class B space has several drawbacks to consider for the cost savings. It’s not likely to be in as prime of a location as Class A nor have the same amenities and quality of finishes. You may find the layout to be less convenient and the building and its other tenants to be “less prestigious” than Class A.

How It Relates to the Local Market: The Central Pennsylvania submarket has 1,303 existing buildings that are classified as Class B. Combined, that’s a total RBA of 28,378,254 square-feet. With a vacancy rate of 7.7% in first quarter 2016, it is the lowest of any submarket in CoStar’s Philadelphia Office Market Area though it’s average asking rental rate is only the third least expensive at $17.36, coming in higher than I-81 Corridor and Southern New Jersey. If you find it overwhelming to understand and interpret the local market trends, a tenant representative/buyer agent can guide you with knowledge and expertise. He or she knows how these trends impact demand and pricing and can use it as leverage to help you negotiate the best deal.

Here are two examples of Class B office space so you can see the variations within a single class.

Class B Office Space located at 200 N. Third St., Harrisburg, PA

Class B Office Space located at 204 S. 3rd St., Boiling Springs, PA

Class C

Overview: Class C office space describes buildings that generally qualify as no-frills, older buildings that offer basic space and command the lowest rents or sale prices compared to other buildings in the same market. Such buildings typically have below-average maintenance and management, and could have mixed or low tenant prestige. Things like inferior elevators, mechanical or electrical systems help reduce the cost, but also increase the possible headache for tenants. These buildings lack prestige and must depend chiefly on a lower price to attract tenants and investors.

Pros: The biggest benefit of Class C office space is its low price in comparison to Class A and B. If you’re looking for a simple and understated work space with zero frills, Class C might be a great option to help you stick within your budget while still gaining the space you need to grow your business.

Cons: When looking at Class C space, you need to keep your expectations in check. This is the lowest of the classes and likely to be the least desirable work conditions as well. There may be things that need obvious repair, the building and its location may leave a lot to be desired and your neighboring tenants are not likely to be prestigious businesses. Having said that, sometimes you can get lucky and find a Class C space in an area that still has “good bones” and a lot to offer the right business. It’s always important to keep an open mind, especially when working with a limited budget!

How It Relates to the Local Market: The Central Pennsylvania submarket has 2,162 existing buildings that are classified as Class C. Combined, that’s a total RBA of 16,600,363 square-feet. With a vacancy rate of 5.1% in first quarter 2016, Central PA has the second to lowest vacancy rate in CoStar’s Philadelphia Office Market Area. It’s average asking rental rate for the first quarter is $14.99 which is the second lowest only to I-81 Corridor.

Unless your expertise is in real estate, you can’t be expected to know the market or understand how to negotiate terms like a professional. The good news is a tenant representative, can help you! Even if you’re not planning to change locations right now, educating yourself on the basic process is always a smart idea.

There’s a lot of information floating around out there that can be quite confusing, so to make the task of finding and leasing a commercial space for your business just a little less challenging, we prepared this “ultimate guide” that will give you a crash course on the most important information. Let’s take a look!

Determine how much space you need and where you need it

It sounds pretty obvious that you’ll need to have an idea of your desired square footage before you begin to qualify properties. What’s not so obvious are all of the different factors that can contribute to how much space you need and where you really need it. Location is just one of these variables. Sure, you want an office that is convenient for your employees, but you may also want a space that is convenient for your customers and brings visibility to your business. For a retail business with a storefront, this is particularly important.

Additionally, you need to consider the space you need right now, but also the space you will reasonably need in the future as you grow. With the popularity of collaborative workspaces, you may also want to prioritize an open floor plan that allows you to create an open and flexible work environment. Don’t forget to include any special needs like extra storage space, multiple conference rooms, co-working areas, etc. Carefully think about all of these details when designing your “ideal space.”

Survey the market

Now that you have an idea of how much space you need and where you need it, you are ready to get to know the current market. This is an important step because it provides you with the knowledge to negotiate and to know the market rate for what you’re looking to rent. Compare multiple properties and make notes of the pros and cons of each. A tenant representative, like Omni Realty Group, can help you pull information on these comparable properties like when a tenant’s current lease ends, how much they’re paying per square foot and if they received any other special deals (like the first year rent-free) that could be used in your favor.

Create a short list

With a good understanding the market, you can begin to narrow down your ideal locations to a short list of qualified properties. If you’re a visual person, make a chart or spreadsheet that lets you see just how they stack up against each other. At the very least, you’ll want to closely compare the pros and cons of their location, amenities and services as well as the history of the current landlord.

Visit them first-hand

The next important piece of comparing those qualitied properties from your short list is to tour them in person to really see how the space looks and how it feels walking through it. It’s amazing how one property may appear to be in the lead on paper, but after visiting each in person, another will rise to the top. Since this is a space you’ll be spending quite a few hours in, it’s worth doing your due diligence and touring each one that you are seriously considering. To get the most out of these tours, you should have your tenant representative with you. He or she will offer a second set of (expert) eyes and ask questions or make note of details you might otherwise overlook.

Put together an RFP

After your site visits, your tenant representative will prepare a Request for Proposal (RFP) and distribute it to the qualified candidate buildings that have “passed the test” thus far. Once you receive the responses from the landlords, you can compare all of the offers side by side. A tenant representative can help you create a quality comparative lease analysis that will allow you to compare all proposals as close to apples-to-apples as possible.

Negotiate

Now the “fun” begins! Negotiations can be one of the most stressful steps of the leasing process, but they are a necessary part of formulating a lease both parties are comfortable with signing. It’s highly recommended to seek counsel to review all legal documents and protect your best interests. This is also where a tenant representative is an invaluable resource and can guide you throughout the process.

Customize the space to your needs

With a successful negotiation process, you are ready for one of the final steps which is planning your new space and customizing it with construction, if necessary. Your business is unique, so you can’t expect someone else’s former office space to fit your exact needs. Construction, whether that’s putting up a few cubicles or completely knocking down walls, is a delicate process for a renter. You need to make sure you have explicit approval from your landlord to protect yourself and any investment you’re putting into customizing your space. A tenant representative can expertly navigate the terms of construction and can sometimes negotiate the cost to be covered by the landlord, either in part or in full. This is yet one more very important scenario where you’ll want a TR on your side!

There you have our “Ultimate Guide for Finding and Leasing a Commercial Space for Your Business” with a lot of valuable information to get you started in the right direction. Most importantly, keep in mind that there is even more information you’ll want to consider throughout your hunt for office space and seeking the help from a professional tenant representative can save you time, money and headaches along the way – so don’t be afraid to start a conversation with one today!

Do you have a question about finding and leasing a space for your business? Ask Omni by commenting below!

With the end of the year upon us, we can finally take a complete look at how the commercial real estate market has performed throughout 2014. However, 2015 holds an endless array of unknowns. How will the market perform? What other factors can we expect to impact commercial real estate? How will this differ nationally to locally?

These questions do not yet have answers, but we can offer our best predictions for what we can expect to happen within the commercial real estate market for 2015. Let’s take a look at where the current trends are likely to lead us in the coming months for both nationally and locally within Central Pennsylvania.

National Market Predictions:

Multi-Family: The rent market is predicted to remain in the landlords’ favor in 2015. Vacancy rates are expected to stay below 5 percent which will likely lead to an increase in rental rates, well above inflation. Apartment rents were projected to increase 4 percent in 2014 and are again expected to increase by 4.1 percent in 2015.

Office: Vacancy rates are predicted to fall from 15.7 percent to 15.6 percent in 2015, with rents expected to rise by 3.3 percent.

Retail: Experts predict that vacancy rates nationwide will drop from their current 9.7 percent to 9.5 percent in 2015 with average retail rents increasing by 2.5 percent.

Industrial market: Industrial real estate vacancies are expected to rise from 8 percent to 8.4 percent next year, while annual rents will continue to rise by another 2.9 percent.

Central Pennsylvania Market Predictions:

Multi-Family: Themultifamily investment sales market will see continued appetite for apartment properties. Rents will increase to more than $1.25 per square foot and the market will continue to absorb new units as they get delivered. Overall, 2015 will be a good year for multi-family real estate.

Office: Market fundamentals continue to trend in a positive direction. The combination of measured new construction, tenant expansion and lessening office contractions will continue to contribute to restoring health to the Central Pennsylvania market. We expect asking rents to continue to stabilize and rise modestly in 2015. On the office investment side, we anticipate medical office space will continue to receive the most investor attention.

Retail: The retail sector will continue to see retailers moving into smaller spaces as they balance brick-and-mortar locations with online shopping. We also predict continued growth of fast-casual restaurants and an expansion of fast-fashion and discount retailers. Owners of power centers and grocery-anchored retail properties will rethink how they use space to fill vacancies in 2015 and beyond.

Industrial: Three main themes are emerging in the industrial sector that will follow into 2015: Rents will continue to climb; tenants will begin shifting to leasing light industrial, or smaller industrial properties in the 50,000 to 250,000-square-foot range; and companies leasing industrial space and landlords developing these properties will increasingly begin to provide more on-site amenities to employees. Development of mega distribution facilities will be limited by the availability of suitable locations.

These predictions for the New Year are what you might expect when looking at the current trends in commercial real estate. It’s important to think ahead as to how they might impact your business or the community in which you live. While some sectors are expected to contract, others show signs of promising growth. In addition to the future of the commercial real estate market, the success of 2015 still lies in our own hands. Best wishes for your best year yet – from your friends at Omni Realty Group!

Share your own predictions for the commercial real estate market in 2015 by commenting below!

This week we will conclude our discussion of the lease vs. buy decision as we address commercial real estate as an investment opportunity. Should you determine that you have enough capital to buy, you’ll be faced with which building to buy based on two distinct criteria: fulfilling your needs and making an investment.

First, you will want a property that is best suited to your individual needs. Does it have enough space? Will there be room to expand? Is it in the right location for your business? We have addressed these questions and others in our previous discussions of this topic.

The second perspective from which you must make your decision is from that of a potential investor. Understandably, every person interested in starting a company is not expected to be an authority on long-term market trends, but nonetheless, you should be able to address a few things. What are the current trends in the area? That is, in 10 or 20 years, will your business still have a place in this area? Also, will your business cause this property to appreciate or depreciate in value? Will the daily demands of your business on the property in question cause so much wear and tear that you cannot sell it for as much as you bought it?

When starting, expanding, or relocating a company, it is important to recognize what your assets are. Keep in mind that if you decide to buy, the property that you purchase will become one of the most important assets that you have. Because of this, it is imperative that you consult an expert. You do not want to leave the future of your business to chance, so be sure to cover of your bases before making a decision on commercial real estate.

Last week, we discussed taking your company’s projected growth into consideration when deciding to buy or lease a commercial property. This week, we’ll address the buy/lease decision from the standpoint of cost effectiveness.

An important factor to consider is up-front cost. Buying involves higher up-front costs than renting. In most cases, renters simply cover the security deposit, utilities and monthly rent. Meanwhile, buyers are responsible for a down payment, mortgage and other costs such as the appraisal, inspection and loan fees.

If your business is new or lacks capital, renting can ensure that you don’t spread your financial resources too thin while building your business. However, if you have the necessary capital, those up-front costs can serve as an investment that pays off long-term when you eventually sell the property.

Another important factor is whether a long-term or short-term solution will best meet your real estate needs. If the long-term vision for your business is not well defined, renting may be more cost effective because it gives you the time and flexibility to define long-term needs and pay lower costs if you decide you need a different property.

If you have a clear vision for your company in the years ahead, buying often makes more sense. Instead of paying rent, your business has an asset that builds equity as you pay the mortgage.

When buying, it’s important to make sure you choose a property that gives you enough space to meet your long-term growth. That’s why many commercial buyers purchase property with more space than they need currently. This also gives you the opportunity to rent the other space for added income.

The decision to buy or lease is an important choice for any business owner. A real estate professional can help determine which option works best for you. A professional can help you estimate how much capital would be necessary to buy a property that meets your needs, or which properties have the best opportunity to yield large profits over time.

When starting or relocating a business, the task of finding the right property can seem daunting. One of the main decisions that business owners will encounter is whether or not to lease or buy property. Both have their pros and cons, but there is not one right answer for everyone. You should ask yourself several questions before making a decision on this matter. How much growth do you foresee in your company’s future? What is the cost of buying (keeping in mind that this will include a down payment and a mortgage, but also initial inspection, appraisal, and loan fees) as opposed to paying rent? Based on market conditions, what is the investment potential of this property? Are you prepared to be a landlord if you should find that you have extra space? These are just the basic questions, and much more complicated accounting, tax, and legal questions can be expected down the road.

If this seems like a lot to manage, it is. It helps to break this task into several smaller ones. The first thing you may want to think about is the growth potential of your company. Are you just starting? If not, how much have you grown in the past year, and how much growth do you anticipate not just in the next year, but also in the next couple of decades? If you think you have reached your maximum potential, then you might want to consider taking the risk and buying. However, if you think you still have room to grow, or you are a new company and are unsure if your plans will pan out, then renting would be the better choice as it involves less risk and responsibility.

Either way, it is not advisable to make this decision and commit one way or the other without first consulting an authority. Being able to talk to somebody who is familiar with current real estate trends, accounting, tax, and legal matters can make all the difference, and can end up saving you a world of money and headaches.

Stay tuned next week when we will continue on our discussion of renting and buying commercial real estate.